GIFT 
WAY    -.67   1918 


THE  CARNEGIE  FOUNDATION 
FOR  THE  ADVANCEMENT  OF  TEACHING 

A  STATEMENT  TO  THE 

TEACHERS  IN  THE  ASSOCIATED 

COLLEGES  AND  UNIVERSITIES 


I C>    J.  i  >J    T— 


D.  I).  I'PDIKK.  •  TIIF.  MKIIRYMOITKT  PRK.SS  •  BOSTON 


THE  CARNEGIE  FOUNDATION 
FOR  THE  ADVANCEMENT  OF  TEACHING 

A  STATEMENT  TO  THE  TEACHERS  IN  THE  ASSOCIATED 
COLLEGES  AND  UNIVERSITIES 

During  the  twelve  years  of  its  existence,  the  officers  and  trustees  of 
the  Carnegie  Foundation  have  been  engaged  in  a  study  of  the  whole 
problem  of  the  protection  of  teachers  against  the  hazards  incident  to 
the  Ufe  of  the  professional  man  living  upon  modest  fixed  salary.  This 
study  resolved  itself  into  three  practical  questions : 

First,  Is  the  free  pension  system  as  originally  adopted  by  the  Foun- 
dation in  the  interest  of  the  teacher  and  can  it  be  made  permanent? 

Second,  If  the  free  pension  is  not  a  permanent  solution,  what  are  the 
terms  upon  which  an  adequate  and  enduring  system  of  protection  for 
college  teachers  should  be  based? 

Third,  In  any  substitution  of  a  new  plan  for  the  old,  what  is  a  reason- 
able and  fair  fulfilment  of  the  expectations  of  the  teachers  in  the  asso- 
ciated institutions? 

The  first  two  of  these  questions  were,  by  a  vote  of  the  trustees  of 
the  Carnegie  Foundation  in  November,  1916,  referred  for  report  to  a 
commission  upon  which  were  trustees  of  the  Foundation,  college  presi- 
dents, university  teachers,  and  others  directly  interested  in  the  solution 
of  these  questions.  An  expert  actuary  was  at  the  service  of  the  com- 
mission and  the  pension  experience  of  the  world  was  available  for  its  use. 
This  commission  reached  definite  conclusions,  which  are  printed  in  full 
in  the  Twelfth  Annual  Report.  In  the  place  of  the  free  pension,  the 
commission  recommended  certain  fundamental  principles  which  should 
underlie  any  pension  system.  It  pointed  out  that  insurance  during  the 
productive  period  of  life  must  supplement  an  annuity  in  old  age;  that  the 
former  was  purely  the  concern  of  the  individual,  while  the  latter  was  a 
joint  obligation  of  the  teacher  and  his  employer,  the  college,  and  should 
rest  upon  their  joint  contributions.  As  a  conclusion  of  its  labors  the 
commission  presented  a  practical  plan  adapted  to  the  needs  of  teachers, 
in  which  the  individual  may  obtain  both  his  insurance  and  his  annuity 


37,3727 


2  STATEMENT  TO  THE  TEACHERS  IN 

under  definite,  contractual  terms,  at  minimum  cost  and  subject  to  the 
scrutiny  of  the  state  departments  of  insurance. 

The  method  of  the  fulfihnent  of  the  expectsitions  of  the  teachers  in 
the  associated  colleges  and  uni\  ersities  was  not  referred  to  this  commis- 
sion. The  determination  of  that  (juestion  is  a  responsibility  which  rests 
upon  the  trustees  of  the  Foundation.  The  commission  very  properly, 
however,  took  occasion  to  express  its  opinion  to  the  trustees  in  the  fol- 
lowing resolutions: 

Voted :  Referring  to  the  resolution  of  the  Board  of  Trustees  of  the  Carnegie  Founda- 
tion, adopted  in  Novemlier,  1915,  tliat  "whatever  plan  is  finally  adopted  will  be 
devised  with  scrupulous  regard  to  the  privileges  and  expectations  which  have  been 
created  under  existing  ndes,''  this  Commission  expresses  the  opinion  that  the  exten- 
sion to  all  teachers  at  present  in  the  associated  institutions  of  the  privilege  of  con- 
tinuing in  the  present  system  would  completely  meet  all  their  reasonable  expecta- 
tions. Tiie  Commission  assumes  that  the  Trustees  of  the  Carnegie  Foundation  will 
in  due  time  announce  a  date  after  which  the  privileges  and  expectations  of  the 
present  system  will  not  be  available  to  those  newly  entering  upon  the  profession  of 
teaching. 

Voted:  That  the  Trustees  of  the  Carnegie  Foundation  be  requested  to  give  all  possible 
consideration  to  the  needs  of  the  older  teac-hers  in  institutions  which  are  not  yet, 
but  may  later  be,  associated  with  tiie  Foundation. 

Voted :  The  Commission  docs  not  know  the  extent  to  which  assistance  can  \ye  obtained 
outside  the  present  funds  of  the  Foundation,  but  it  is  acting  on  the  expectation 
of  substantial  jussistance  in  carrying  a  large  but  limited  load,  and  with  the  further 
understanding  that  adequate  assistance  cannot  be  obtained  to  carr\'  the  ever  increas- 
ing pension  burden  without  calling  upon  institutions  and  individual  teachers  to  bear 
a  share. 

The  report  of  this  commission  was  considered  by  the  tnistees  of  the 
Carnegie  Foundation  at  a  special  meeting  held  in  May,  1917.  At  that 
meeting  the  trustees  took  up  and  accepted  the  statement  of  funda- 
mental principles  of  a  pension  system  as  framed  by  this  commission. 
The  trustees  also  accepted  the  form  of  machinery  recommended  bv  the 
commission  to  carry  out  these  ])rinciplos  as  it  is  embodied  in  the  pro- 
posed Teachers  Insurance  and  ^Vnnuity  Association,  and  voted  to  ask 
of  the  trustees  of  the  Carnegie  Corporation  one  million  dollars  to  estab- 
lish this  agency. 


ASSOCIATED  COLLEGES  AND  UNIVERSITIES  3 

To  fulfil  the  expectations  of  teachers  in  the  associated  institutions  in 
the  manner  suggested  by  the  commission  was  beyond  the  power  of  the 
trustees  because  the  funds  at  their  disposal  were  inadequate. 

There  were  in  active  service  in  these  institutions  on  November  17, 
1915,'  some  6600  teachers,  including  professors,  associate  and  assistant 
professors,  and  instructors.  These  teachers  were  distributed  in  age  as 
follows: 

Affe  Number  of 

Teachers 

20-24  34 

25-29  559 

30-34  1149 

35-39  1235 

40-44  1124 

45-49  925 

50-54  675 

55-59  440 

60-64  247 

65-86  238 

6626 

This  number  must  of  course  decrease  year  by  year  since  teachers  en- 
tering these  institutions,  after  the  date  named,  come  under  the  new  plan. 

The  conditions  under  which  expectations  have  been  created  are  the 
following: 

Seventy-four  colleges  and  universities  have  been  admitted  to  the 
pension  benefits  of  the  Foundation.  The  teachers  of  these  institutions 
have  the  privilege  of  retiring  under  the  following  rules : 

1.  An  old  age  retiring  allowance  is  granted  at  the  minimum  age  of 
sixty-five,  after  fifteen  years  of  professorial  service. 

2.  A  disability  allowance  is  granted  after  twenty-five  years  of  service 
in  case  of  complete  disability. 

3.  Widows  of  teachers  qualified  under  provision  1  or  2,  or  widows  of 
teachers  who  die  before  retirement  after  twenty-five  years  of  service, 
receive  one-half  of  the  pensions  accredited  to  their  husbands. 

4.  The  Carnegie  Foundation  retains  the  power  to  alter  these  rules  in 

'  On  this  date  the  trustees  passed  resolutions  looking  toward  the  adoption  of  a  contributory  pension  plan.  These  reso- 
lutions accompanied  the  President's  report  on  the  new  plan,  which  was  sent  to  the  trustees,  officers,  and  teachers 
of  all  of  the  associated  institutions. 


4  STATEMENT  TO  THE  TEACHERS  IN 

such  manner  as  experience  may  indicate  as  desirable  for  the  benefit  of 
the  whole  body  of  teachers. 

An  actuarial  estimate  of  the  load  likely  to  accrue  year  by  year  from 
the  retirement  of  these  teachers  underthe  present  rules  involves  assump- 
tions of  great  uncertainty.  The  actuaries  have  little  information  to  guide 
them  in  determining  the  rate  of  separation,  the  age  at  which  men  will 
choose  to  retire,  or  the  average  salary  thirty  years  hence.  The  records 
of  the  Foundation  show  that  there  is  a  large  drift  from  the  associated 
colleges  to  the  hundreds  of  other  colleges  and  universities  in  the  United 
States  and  Canada,  and  these  records  show  also  that  a  large  proportion 
of  younger  men  go  out  of  teaching.  But  how  large  these  factors  are  is 
unknown.  Further,  it  is  evident  that  the  war  will  have  a  marked  effect 
on  this  situation.  Already  a  large  number  of  teachers  under  forty  have 
given  up  their  positions.  Some  of  these  will  return  to  their  places,  but 
many  will  enter  other  callings,  or  be  distributed  among  other  colleges. 

The  only  assimiptions  that  can  be  made  are  that  men  will  withdraw 
in  somewhat  the  same  proportion  as  during  the  past  five  years,  and  that 
teachers  will  avail  themselves  of  the  privilege  of  retirement  as  soon  as 
it  is  open  to  them. 

Under  these  jissumptions  the  computations  of  the  actuaries  show 
that  the  load  arising  from  the  pensions  of  these  teachers  will  steadily  in- 
crease, reaching  its  maximum  about  thirty  years  hence, then  diminishing, 
until  about  the  forty-fifth  year  the  annual  cost  will  approach  the  present 
income  of  the  Foundation.  CompuUitions  on  this  bjisis  indicate  that  tlie 
total  sum  necessary  to  be  paid  out  during  the  forty-five  years  to  carry 
out  the  present  rules  completely  in  the  cases  of  these  teachers  will  be 
$69,000,000,  in  addition  to  the  sums,  now  amounting  to  about  .^700.000 
annually,  which  the  Foundation  pays  to  teachers  already  retired  and  to 
widows  of  such  teachers. 

During  the  same  period  the  income  of  the  Foundation  available  for 
such  pensions  will  be  approximately  $;{+. 000,000.  To  carry  out  the  pres- 
ent rules  unchanged  would  require  twice  as  much  money  as  the  trus- 
tees have  at  their  disposal.  In  the  light  of  these  figures  the  expectiitions 
of  the  teachers,  as  formulated  by  the  connnission,  were  obviously  not 
justified  by  the  facts  of  the  situation. 


ASSOCIATED  COLLEGES  AND  UNIVERSITIES  5 

In  making  and  announcing  the  present  rules,  the  trustees  of  the 
Carnegie  Foundation  took  pains  not  to  bind  themselves  by  promises 
which  they  might  be  unable  to  fulfil.  In  connection  with  their  original 
announcement,  and  as  part  of  the  same  memorandum,  they  expUcitly 
reserved  the  right  to  make  such  changes  in  the  rules  of  retirement  as 
experience  may  indicate  as  desirable  for  the  benefit  of  the  whole  body 
of  teachers.  This  right  has  been  twice  exercised:  once  in  the  year  1908, 
by  the  extension  of  the  privileges  of  the  Foundation  to  instructors  and 
to  widows,  and  again  in  1910  by  the  elimination  of  the  pension  hitherto 
granted  on  the  basis  of  service  alone.  These  facts  were  fully  known  to 
the  teachers  in  associated  institutions.  But  so  great  was  the  desire  of  the 
trustees  to  meet  every  expectation  that  had  been  created,  whether  fully 
justified  or  not,  and  so  serious  was  their  reluctance  to  curtail  privileges 
which  had  been  mistakenly  regarded  as  promises,  that  after  full  delibera- 
tion the  trustees  of  the  Foundation  decided  to  ask  the  aid  of  the  Carnegie 
Corporation  in  carrying  out  the  present  rules  upon  the  exact  terms  sug- 
gested by  the  commission — even  tho  they  knew  that  the  demands  made 
upon  the  trustees  of  the  Carnegie  Corporation  were  so  great  as  to  make 
it  doubtful  whether  this  request  could  be  granted  in  its  entirety.  This 
request,  forwarded  in  the  latter  part  of  May,  1917,  was  conveyed  in  the 
following  resolutions : 

Voted:  That  the  Carnegie  Corporation  of  New  York  be  asked  to  cooperate  with  the 
Carnegie  Foundation  for  the  Advancement  of  Teaching  in  carrying  out  the  recom- 
mendations of  the  Commission  in  the  following  matters: 

1.  By  enabling  the  Foundation  to  fulfil  the  expectations  of  teachers  in  the  associated 
colleges  and  universities  prior  to  the  seventeenth  of  November,  1915.  This  will 
involve  a  large  but  limited  liability  extending  over  a  numberof  years,  the  extent  of 
which  will  be  clearly  indicated  by  the  actuarial  reports  which  accompany  this  record. 

2.  By  enabling  the  Foundation  to  afford  some  assistance  during  the  transition  period 
of  the  next  twenty  years  toward  the  retiring  allowances  of  old  teachers  in  institu- 
tions which  are  not  now,  but  may  later  be,  associated  with  the  Foundation.  At  the 
present  time  the  Foundation  is  devoting  the  income  of  more  than  $2,000,000  of  its 
endowment  to  the  payment  of  pensions  to  teachers  not  in  the  associated  institu- 
tions. 

8.  By  supplying  the  capital  necessary  to  establish  the  Teachers  Insurance  and  Annu- 
ity Association.  The  sum  necessary  to  establish  the  Teachers  Insurance  and  Annuity 
Association  is  $1,000,000. 


6  STATEMENT  TO  THE  TEACHERS  IN 

In  reply  to  these  resolutions,  the  trustees  of  the  Corporation  an- 
swered, in  November  last,  that  they  had  given  earnest  study  to  the 
requests  of  the  Foundation;  they  expressed  their  appreciation  of  the 
diflicult  questions  with  which  the  trustees  of  the  Foundation  have  had 
to  deal,  and  indicated  their  desire  to  aid  toward  a  wise  and  just  solution 
of  its  problems.  In  extending  such  aid,  however,  the  trustees  of  the  Cor- 
poration stilted  that  they  were  ol)liged  to  tiike  into  account  not  alone 
the  expectations  of  the  Foundation,  but  tiie  needs  of  other  causes  as 
well ;  that  as  a  sound  principle  for  their  guidance  they  must  assume  that 
such  obligations  as  the  Corporation  undertakes,  whether  on  behalf  of 
the  institutions  bearing  Mr.  Carnegie's  name  or  for  other  agencies,  shall 
be  determinate.  The  present  trustees  of  the  Corporation  did  not  feel  jus- 
tified in  mortgaging  any  large  part  of  its  income  for  an  indefinite  num- 
ber of  years.  In  the  light  of  these  general  principles,  the  trustees  of  the 
Corporation  stated  that  such  aid  as  they  could  extend  in  enabling  the 
Foundation  to  fulfil  the  expectations  of  teachers  must  be  expressed  in 
terms  which  are  definite,  both  as  to  amount  and  as  to  duration.  Bearing 
in  mind  these  limitations,  the  trustees  of  the  Corporation  have  agreed 
to  supply,  in  answer  to  tlie  request  of  the  Foundation,  thirteen  millions 
of  dollars,  of  which  one  million  is  to  provide  capital  and  surplus  for 
the  Teachers  Insurance  and  Aiuuiity  Association,  one  miUion  is  to  be 
devoted  to  the  assistance  of  teachers  and  colleges  not  now  associated 
with  the  Foundation,  while  eleven  milhons  shall  go  to  the  creation  of  a 
reserve  under  the  following  conditions: 

l.The  Foundation  shall  begin  at  once  the  accumulation  of  a  i"e.sen'e  fund  for  the 
liquidation  of  jKMision  obligations  to  lu-cruc  from  teachers  in  the  associated  institu- 
tions. Into  this  reserve  fund  the  Fomulation  shall  place  its  present  suqiius  amount- 
ing to  approximately  one  million  dollars.  To  this  reserve  fund  tlic  Corporation  sliall 
contribute  ?.'j,0()(),000  par  value  of  honds,  any  deferred  payments  at  the  conven- 
ience of  the  Cor|)oration  to  l)e  made  as  of  .lanuarv  1,  191S,  with  interest  at  four 
percent.  This  reserve  is  to  Ik-  pl(U'e<l  in  a  spi-cial  account  by  the  Foimdation,  and 
the  income  from  it  added  to  the  reserve  from  yciir  to  year  for  a  period  of  ten  years. 

2.  The  CoqM)ration  shall  pay  into  the  tn-asury  of  the  Foundation  for  the  same  period 
of  ten  years  SlUHl.OOO  aiuiuallv,  at  the  convenience  of  the  Coqioration.  T\w  entire 
annual  income  of  the  Foundation  not  requii-od  in  the  judgment  of  the  trustees  for 
the  payment  of  pensions  is  to  be  carried  at  the  end  of  each  year  to  the  reserve  fund. 


J 


ASSOCIATED  COLLEGES  AND  UNIVERSITIES  7 

3.  The  reserve  thus  created  shall  be  available  at  the  end  of  ten  years  for  the  discharge 
of  the  obligations  of  the  Foundation  as  they  may  accrue  thereafter.  Should  the  expe- 
rience of  the  next  fifteen  years  prove  that  some  further  adjustment  is  necessary  at 
the  period  of  maximum  load,  thirty  years  hence,  the  responsibility  for  such  atljust- 
ment  rests  with  the  Foundation.  Should  the  reserve  prove  greater  than  is  demanded 
for  this  purpose,  the  residuum  shall  be  added  to  the  permanent  endowment  of  the 
Foundation  to  be  used  for  its  corporate  purposes. 

This  generous  addition  to  the  resources  of  the  Foundation  will  pro- 
vide, at  the  end  of  ten  years,  a  large  reserve,  available,  principal  and 
interest,  for  the  payment  of  pensions.  This  reserve,  together  with  the 
income  of  the  Foundation,  will  enable  the  trustees  to  expend  during  the 
next  forty-five  years  in  meeting  the  expectations  of  the  teachers  in  the 
associated  institutions  over  fifty  millions  of  dollars. 

Even  this  large  sum  is  not  sufficient  to  cany  out  the  present  rules 
without  some  modifications,  and  as  a  part  of  the  agreement  to  this  joint 
arrangement,  the  trustees  of  the  Corporation  attached  the  following 
condition : 

"The  trustees  of  the  Carnegie  Foundation  shall  now  and  hereafter, 
from  time  to  time  as  may  prove  necessary,  revise  their  rules  so  that  the 
pensions  provided  for  shall  not  exceed  the  financial  resources  of  the 
Foundation." 

The  trustees  of  the  Carnegie  Foundation  have  now  a  definite  sum 
with  which  to  deal,  and  the  revision  of  the  rules  in  accordance  with  the 
agreement  with  the  Corporation  is  now  their  first  duty. 

The  general  principles  upon  which  this  revision  should  be  based  seem 
clear.  Men  within  measurable  distance  of  the  retiring  age  have  expec- 
tations of  a  very  definite  character.  To  some  extent  their  plans  for  the 
future  are  founded  upon  a  retiring  allowance  at  sixty-five.  On  the  other 
hand,  teachers  who  are  many  years  from  retirement  have  no  such  defi- 
niteness  of  expectation,  and  have  not  altered  their  life  plans  in  the 
prospect  of  a  pension  many  years  hence.  Furthermore,  younger  teachers 
will  obtain  thru  the  new  Insurance  and  Annuity  Association  far  greater 
advantages  in  the  way  of  cheap  insurance  and  annuities  than  older  men. 
From  every  consideration  of  equity,  therefore,  it  is  desirable  that  such 
revision  as  is  necessary  shall  be  so  planned  as  to  affect  the  retirement  of 
older  men  as  little  as  possible  and  to  apportion  changes  in  the  retiring 


8  STATEMENT  TO  THE  TEACHERS  IN 

allowances  of  younger  men  with  a  view  to  the  benefits  they  will  enjoy 
from  the  Teachers  Insurance  and  Annuity  Association. 

The  nature  and  extent  of  the  readjustment  that  must  be  made  will 
be  more  clearly  understood  if  the  resources  and  expectations  are  stated 
in  terms  of  "present  values'" '  rather  than  in  estimated  gross  amounts 
payable  thru  a  long  term  of  years.  Stated  in  present  values,  as  of  De- 
cember 31,  1917,  the  situation  is  as  follows: 

Resources  available  for  allowances  in  associated  institutions  $26,000,000 

Amount  required  to  pay  pensions  now  in  force  5,700.000 

Available  for  allowances  to  those  now  in  active  service  $20,300,000 

Estimated  present  value  of  expectations  under  the  existing  rules  $28,000,000 

Reduced  to  its  simplest  terms,  the  problem  confronting  the  trustees  is 
to  devise  a  plan  of  retirement  for  those  now  in  service  in  the  associated 
institutions  which  will  reduce  tlieir  obligations  by  approximately  eight 
million  dollars  (present  value),  while  meeting  reasonable  expectiitions  in 
the  fullest  possible  measure.  Furthermore,  it  is  the  duty  of  tlie  trustees 
to  propose  now  such  measure  of  retrenchment  as  nearly  tis  it  can  be  ascer- 
tained in  order  that  equal  justice  be  done,  otherwise  the  drastic  reduc- 
tions that  may  be  necessary  fifteen  or  twenty  years  hence  will  be  entirely 
at  the  expense  of  men  whose  pensions  fall  in  at  a  later  date.  AVith  the 
aid  of  expert  actuaries  the  executive  committee  has  examined  every 
feasible  assumption  for  bringing  the  cost  of  the  future  pension  load  within 
thehmitofits  known  resources.  It  has  tiikcn  into  consideration  all  tlie 
suggestions  of  the  sissociated  institutions'  and  of  the  .Vmerican  Asso- 
ciation of  University  I'rofessors.'  l^ike  all  problems  in  which  pensions 
are  concerned,  it  is  only  partly  actuarial.  The  underlying  assumptions 
which  touch  the  questions  of  equity  and  of  availability  to  teachers  are 
matters  of  general  judgment. 

There  are  only  three  feasible  methods  of  reducing  tiie  future  cost  of 
the  estimated  load:  (1)  to  cut  off  entirely  tiie  expectiitions  of  a  large 

'  Prrnrnt  viiliie  la  thnt  mim  which,  if  In  hand  December  SI.  1917.  and  invested  In  «uch  i\  vrny  n.«  to  renllie  Interest  at 
the  aMume<l  mte.  will  exnctly  niimcv  to  meet  all  oblicatlnnn  iw  they  mature,  and  will  be  entirely  exhaiuted.  both 
principal  and  intere»t.  in  Ihc  procew.  if  the  BMumptloni  repinlinK  mortality,  aire  of  retirement,  amount  of  annul- 
tien,  etc..  arc  realiie<l  In  exporience. 
■  Publiahed  in  full  in  the  Elrtynth  Annual  Rrporl. 

•  "  If  It  »houUI  be  found  that  the  financial  resources  of  the  Foundation  and  the  fund»  which  may  lie  availed  of  by 
it  are  iniutncient  for  lhl»  purpon*'  Uien.  of  the  variouiiunceitiona  which  have  been  made  for  reducinx  the  l>eneflta 
of  the  exUtinc  lyatero.  we  regard  a  gradual  clunie  In  the  minimum  ace  of  retirement  aj  pcrlupa  the  leaat  objec- 
tionable."—l«l(l  Report  of  the  Committee  on  Penaloaa  of  the  American  Aaaorlallon  of  L'niveraity  ProfcMor*. 


ASSOCIATED  COLLEGES  AND  UNIVERSITIES  9 

number  of  teachers,  (2)  to  raise  the  minimum  age  of  retirement,  or 
(3)  to  cut  down  the  value  of  the  average  pension. 

The  first  method  has  been  rejected  as  inequitable.  It  is  recognized 
that  the  financial  value  of  the  expectation  of  a  teacher  at  age  30  is  very 
different  from  that  of  another  teacher  at  age  60,  but  the  equity  of  the 
expectation,  whatever  its  cash  value,  is  the  same.  It  would  be  entirely 
feasible  to  make  a  solution  of  the  problem  thru  either  one  or  the  other 
forms  of  reduction.  If  the  minimum  age  of  retirement  is  at  once  raised 
to  70  years,  the  problem  would  be  solved.  On  the  other  hand,  the  same 
result  can  be  effected  by  cutting  down  all  retiring  allowances  about  one- 
third. 

The  objection  to  the  adoption  of  either  of  these  measures,  to  the  ex- 
clusion of  the  other,  is  so  weighty  that  some  compromise  plan  is  inev- 
itable. If  the  minimum  age  of  retirement  were  arbitrarily  raised  to  70, 
not  only  would  such  a  radical  change  produce  much  hardship  and  dis- 
appointment to  teachers,  but  the  plans  of  institutions  which  have 
fixed  an  earlier  date  of  retirement  would  be  upset.  While  the  date  at 
which  a  teacher  ought  to  retire  varies  with  the  individual,  to  compel 
all  teachers  to  wait  to  70  years  of  age  for  retirement  would  go  far  to 
destroy  the  value  of  the  retiring  system  both  to  the  teachers  and  to 
the  colleges. 

On  the  other  hand,  if  a  sweeping  reduction  of  allowances  were  under- 
taken, the  burden  would  fall  with  most  distressing  effect  upon  those  who 
have  the  greatest  claim  to  consideration — those  who  will  retire  in  the 
near  future. 

It  has  been  found  possible  to  devise  a  plan  under  which  the  teacher 
may  either  have  retirement  at  65  or  the  full  pension,  or  such  adjustment 
between  the  two  as  may  best  suit  his  individual  needs. 

The  moment  the  matter  is  closely  examined  it  becomes  evident  that 
the  question  of  minimum  age  at  which  retirement  may  be  had  cannot 
be  separated  from  that  of  the  amount  of  the  average  pension.  For  ex- 
ample, a  retiring  allowance  of  $1500  for  man  and  wife  available  at  age 
65,  one  of  $1980  available  at  age  67,  and  one  of  $2370  available  at  age 
70  are  actuarially  equivalent.  The  two  questions  cannot  be  separately 
handled :  as  soon  as  the  amount  of  money  available  is  definitely  limited, 
a  teacher  who  retires  at  the  age  of  70  is  equitably  entitled  to  a  larger 


10  STATEMENT  TO  THE  TEACHERS  IN 

pension  than  he  would  have  received  had  he  retired  at  65.  He  cannot 
equitably  claim  the  same  pension  at  do  that  he  could  at  70.  One  other 
consideration  must  be  recognized.  The  man  within  measurable  disUuice 
of  retirement  has  expectations  of  a  very  definite  character.  To  a  consid- 
erable extent  his  future  is  planned  upon  a  stated  retiring  allowance.  He 
is  too  old  to  avail  of  the  advantages  of  the  Teachers  Insurance  and  An- 
nuity Association  to  provide  an  annuity  to  supplement  his  pension.  Men 
further  away  from  retirement  have  not  framed  their  life  plans  upon  a 
definite  retiring  allowance  years  lience.  and  in  addition  tliey  can  by  verj' 
moderate  payment  secure  annuities  supplementing  their  pensions.  Thus 
a  man  of  45  by  payment  of  §04  a  year  could  provide  a  $1000  annuity 
available  between  the  ages  05  and  68,  or  a  man  of  30  by  pa^niient  of  §34 
a  year  could  obtiiin  a  one  thousand  dollar  annuity  contract  available 
between  05  :md  70.* 

A  teacher  in  an  associated  institution  will,  of  course,  be  able  to  make 
such  provision  for  insurance  or  annuity  as  he  sees  fit  thru  the  Insurance 
Association,  witiiout  prejudice  to  his  expectation  of  a  retiring  allowance 
from  the  Foundation. 

Careful  actuarial  analysis  of  tlie  problem  indicates  that  the  resources 
available  will  suffice  to  support  a  system  of  retiring  allowances  for  the 
teachers  who  were  in  associated  institutions  on  November  17,  1915, 
upon  the  following  rules: 

I.  The  minimum  age  at  whicli  allowances  will  be  granted  (except  on 
the  basis  of  disability)  sliall  remain  at  0.3. 

II.  The  maximum  allowance  available  to  a  tcaclier  shall  contimie 
to  be  computed  upon  the  present  formula.  Allowance  eipials  one-half 
active  pay  plus  §400. 

III.  The  maximum  allowance  shallbe  available  upon  the  present  basis 
to  all  teachers  reaching  the  age  of  65  on  or  before  June  30,  l'.)23. 

IV.  The  maximum  allowance  shall  be  available  after  .Tunc  30,  r.)'23, 
on  the  following  terms: 

Ik'twit'ii  .Iiilv  1,  l!)y:5,  and  June  80, 1925,  niaximum  allowance  at  66 
Ik'twecn  .lulv  1,  19ii5,  and  .Tuml-  30,  192(5,  maximum  allowanc-e  at  67 
Bi'twitMi  Julv  1, 1926,  an<l  .lime  30,  1927,  maximum  allowantx-  at  68 
Betwwn  July  1, 1927,  and  Juno  30, 1928,  maximum  allowance  at  69 

'The»e  fi»iiri-<  nrc  on  llir  iiMumptlon  Uint  In  ciuh-  of  dentil  In  the  Intennl  Ihc  accumulnllon  la  not  rcturnnl.  An 
option  on  the  Inniii  or  rolurn  to  tho  rstjitc  of  the  ilit-edent  will  ulioi  he  ofTered. 


ASSOCIATED  COLLEGES  AND  UNIVERSITIES  11 

V.  After  June  30, 1928,  the  maximum  allowance  shall  be  available 
at  age  70. 

VI.  For  those  whose  allowances  begin  below  the  age  at  which  the 
maximum  allowance  is  available  according  to  Rules  IV  and  V  the  actual 
allowance  shall  be  the  maximum  allowance  diminished  at  the  rate  of 
one-fifteenth  for  each  year  by  which  the  age  at  which  the  maximum  is 
available,  is  anticipated,  due  allowance  being  made  for  fractions  of  a 
year. 

VII.  For  those  reaching  65  after  June  30, 1923,  the  allowance  of  a 
teacher  who  is  unmarried,  or  whose  wife  is  not  living,  shall  be  two-thirds 
of  the  allowance  as  fixed  by  the  preceding  rules.  In  the  cases  of  teachers 
retiring  on  a  salary  of  Si 800  or  less  this  reduction  shall  be  15  per  cent. 

The  rules  framed  above  are  definite  and  simple.  Any  teacher  can  at 
once  determine  from  them  his  retiring  allowance.  He  needs  to  know  only 
his  age  and  his  active  pay  at  the  time  of  retirement. 

To  illustrate.  A  teacher  aged  57  in  ISIay,  1918,  will  be  65  years  old 
in  1926.  Assume  that  he  is  married  and  that  his  salary  is  such  as  to  give 
him  a  retiring  allowance  of  $3000  under  the  present  rules.  Under  the 
proposed  plan,  $3000  would  be  his  maximum  allowance,  which  he  could 
receive  when  he  became  70  in  1931.  If  he  elected  to  retire  at  G5,  66,  67, 
or  68,  in  1926,  1927,  1928,  or  1929,  he  would  in  each  case  anticipate  the 
maximum  by  two  years,  and  his  allowance  would  be  $2600 ;  if  he  retired 
at  69,  his  allowance  would  be  $2800.  If  he  were  unmarried,  his  allowance 
would  be  two-thirds  of  these  respective  amounts  at  the  corresponding 
ages. 

To  illustrate  again.  A  teacher  aged  50  in  May,  1918,  will  be  65  in  1933. 
Assume  him  married  and  entitled  to  a  maximum  retiring  allowance  of 
$3000,  available  at  70.  If  he  elected  to  retire  at  65,  his  allowance  would 
be  $2000;  at  66,  $2200;  at  67,  $2400;  at  68,  $2600;  at  69,  $2800.  If  un- 
married, or  after  the  death  of  his  wife,  he  would  receive  two-thirds  of 
the  respective  sums  at  the  corresponding  ages. 

It  goes  without  saying  that  these  rules  are  not  adopted  with  the  ex- 
pectation that  the  age  68,  69,  or  70  is  suitable  to  the  great  body  of  teach- 
ers as  a  time  of  retirement.  Nor  is  it  assumed  that  the  outcome  of  this 
action  will  result  in  the  retention  of  any  large  proportion  of  men  to 


IJ  STATEMENT  TO  THE  TEACHERS  IN 

such  age.  Any  teaclier  who  desires  to  do  so  may  retire  at  65.  For  those 
within  ten  years  of  retirement  the  rules  are  so  framed  that  they  may 
retire  with  small  changes  in  their  expected  allowances.  The  question 
how  long  a  teacher  shall  remain  in  service  is  one  between  him  and  his 
college. 

These  measures  have  been  framed  upon  the  basis  of  exhaustive  actu- 
arial computations.  Such  estimates  necessarily  involve  many  sissump- 
tions,  and  the  stiitement  of  the  result  in  dollars  gives  a  fallacious  im- 
pression of  accuracy.  It  is  impossible  to  forecast  absolutely  the  rate  of 
interest  over  long  periods,  the  rate  of  separation,  the  result  of  changes 
brought  about  by  the  war, — all  weighty  factors.  The  estimates  are  be- 
lieved to  be  conservative  in  the  sense  that  they  have  taken  into  account 
all  sources  of  expense.  The  next  five  years  may  show  a  situation  that 
may  make  possible  a  more  liberal  scale  for  the  future. 

It  must  be  clearly  understood  that  the  trustees  of  the  Foundation  have 
a  stated  amount  with  which  to  deal,  and  if  the  experience  of  the  next 
five  or  ten  years  shows  a  wide  variation  from  the  assumed  conditions, 
they  may  be  compelled  to  make  such  changes  as  may  bring  the  expendi- 
tures within  their  resources. 

While  the  income  of  the  Foundation  will  thus  be  devoted  for  many 
years  to  come  to  the  payment  of  pensions  to  teachers  in  the  associated 
colleges,  the  endowment  itself,  consisting  of  fifteen  millions  of  dollars, 
will  remain  intact.  It  will  devolve  upon  the  trustees  of  the  Carnegie 
Foundation  of  the  next  generation  to  determine  how  they  can,  at  that 
time,  best  use  the  income  of  this  endowment  in  carrying  out  the  objects 
designated  by  Mr.  Carnegie  in  his  letter  of  gitl  and  embodied  in  the 
Act  of  Congress  incorporating  the  Foundation. 

The  gifl  of  the  Founder  of  this  institution  was  conceived  in  the  most 
generous  spirit.  It  has  enabled  hundreds  of  college  teachers  grown  old 
in  service  to  retire  in  comfort  and  security.  As  a  permanent  solution  of 
the  problem  of  the  protection  of  teachers  from  tlie  risk  of  dependence, 
the  plan  originally  adopted  by  Mr.  Carnegie  and  by  the  trustees  of  the 
Foundation  was  insulHcicnL  It  iuis  serveil  its  purpose.  The  real  gain  to 
colleges,  both  of  the  associated  list  of  institutions  and  of  those  not  so 
related,  lies  in  the  fact  that  the  pension  problem  has  been  worked  out 
and  its  solution  provided  for  upon  a  basis  that  is  reasonable,  sound,  and 


ASSOCIATED  COLLEGES  AND  UNIVERSITIES  18 

enduring.  For  fifty  years  to  come  the  Foundation  will  devote  its  income 
and  its  accumulated  reserve  to  the  fulfilment  of  the  expectations  of 
the  teachers  admitted  to  the  benefits  provided  under  the  old  plan.  The 
solution  of  this  question  that  has  finally  been  reached  is  made  possible 
by  the  generous  aid  of  the  Carnegie  Corporation.  It  is  regarded  by  high- 
minded  and  thoughtful  men  looking  at  the  matter  from  a  detached 
and  disinterested  point  of  view  as  a  fair  and  generous  fulfilment  of  the 
expectations  of  these  teachers.  It  is  believed  that  it  will  be  so  regarded 
by  the  teachers  themselves.  The  obligations  in  this  matter  do  not  lie 
whoUy  with  the  trustees  of  the  Carnegie  Foundation.  There  are  also  obli- 
gations upon  the  teachers  and  the  colleges  who  have  been  for  twelve 
years,  and  who  will  continue  to  be  for  seventy-five  years  to  come,  the 
chief  beneficiaries  of  the  trust.  The  common  obligations  of  trustees  and 
beneficiaries  have  perhaps  been  nowhere  better  stated  than  in  the  fol- 
lowing words  from  the  President  of  the  American  Association  of  Uni- 
versity Professors  in  his  presidential  address  of  last  year : 

"The  founder's  idea  was  a  noble  and  unique  one;  himself  and  his 
trustees  are  entitled  to  our  heartiest  gratitude  and  cordial  sym- 
pathy. The  grumbling  and  even  hostile  attitude  sometimes  ex- 
hibited is  not  justifiable.  All  parties  can  and  should  approach  the 
subject  in  a  spirit  of  desire  for  frank  exchange  of  views  and  of  mu- 
tual support.  .  .  .  The  situation  at  the  outset  was  novel ;  the  enter- 
prise was  in  some  degree  inevitably  experimental  and  alterable.  The 
trustees  were  and  are  morally  entitled  to  make  such  changes  as  may 
seem  absolutely  necessary;  the  propriety  of  fulfilling  natural  ex- 
pectations of  beneficiaries  being  as  obvious  to  the  trustees  as  to 
others.  AVhatever  change  of  plan  is  proposed  will  properly  rest  for 
its  adoption  upon  the  just  and  enlightened  judgment  of  the  trus- 
tees after  full  deliberation." 

The  present  memorandum  aims  to  set  before  the  teachers  of  the  as- 
sociated colleges  the  principles  upon  which  the  trustees  of  the  Carnegie 
Foundation  and  of  the  Carnegie  Corporation  have  acted,  and  to  make 
clear  to  teachers  of  all  ages  the  exact  nature  of  the  security  underlying 
their  expectations.  It  is  not  intended  to  answer  in  detail  the  questions 
pertaining  to  each  individual.  The  Teachers  Insurance  and  Annuity  As- 
sociation will  be  incorporated  as  soon  as  the  committees  appointed  by 
the  actuarial  societies  have  made  their  suggestions  available.  Teachers 


14  STATEMENT  TO  THE  TEACHERS 

in  the  colleges  of  the  United  States  and  Canada  can  then  obtain  from 
the  actuary  of  the  Association  full  detiiils  as  to  insurance  and  annuities, 
as  well  as  any  advice  they  may  desire  as  to  the  policies  suited  to  indi- 
vidual circumstances.  In  the  Twelfth  Annual  Report  of  the  Foundation, 
now  going  thru  the  press,  the  plan  of  the  Teachers  Insurance  and  An- 
nuity Association  is  fully  explained.  The  trustees  of  the  Carnegie  Foun- 
dation meet  in  the  latter  part  of  April  to  restate  their  rules  for  the  future 
admission  of  institutions  to  the  associated  list  as  affected  by  the  estab- 
lishment of  the  Teachers  Insurance  and  Annuity  Association.  It  will  be 
understood  that  the  Carnegie  Foundation  and  the  Teachers  Insurance 
and  Annuity  Association  of  America  are  entirely  distinct  organizations 
under  separate  boards  of  trustees, — the  former  in  the  eyes  of  the  law  a 
charitable  institution  operating  under  a  charter  issued  by  the  Congress 
of  the  United  States;  the  latter  in  the  eyes  of  the  law  an  insurance  com- 
pany operating  under  a  charter  granted  by  the  State  of  New  York  and 
subject  to  the  scrutiny  of  the  State  Department  of  Insurance  in  exactly 
the  same  manner  as  any  other  insurance  company. 

liy  direction  of  the  Trustees  of  the  Carnegie  Foundation: 

Nicholas  Mihray  Butler 
Robert  A.  Franks 
Arthur  T.  Hadley 
Alexander  C.  Humphreys 
Henry  S.  Pritchett 
Jacob  Gouli)  SrnrRMAN 
Frank  A.  Vaxderlip 

Ejrenit'ive  Committee. 

April  2^,  1!)I8.  , 


Gaylord  Bros. 

Mak*r« 
Syracus*.  N    V. 


'u  c:^a4b 


UBR^^^^^ 


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